U.S.: Post City of Yes - What to Expect in 2025

NYC Development 2025: The beginning of the next boom?

2024 was a banner year for policy changes in New York, both at the state and city levels.  After years of think pieces and industry pleas for updated regulations and incentives to spur development, 2024 saw comprehensive rewrites to the Zoning Resolution of the City of New York and an overhaul of New York State housing tax policy to bring it into alignment with zoning requirements and, perhaps more importantly, resurrect dozens, perhaps hundreds, of stalled projects that were presumed dead owing to the City’s (indeed, the United States’) post-COVID economic slump.  

City of Yes:  A little more housing or a lot?

On December 5, 2024, the City Council and the City Planning Commission passed landmark changes to the Zoning Resolution.  Known as “City of Yes for Housing Opportunity”—and described by planning officials as intended to create “a little more housing in every neighborhood”—the zoning amendment simplifies affordable housing requirements (across-the-board 20 percent increase in residential floor area in higher density districts where 20 percent of dwelling units are “affordable”), dramatically reduces parking mandates for neighborhoods with good access to public transit, and expands existing programs for converting obsolete office and other non-residential space to apartments.  Experts question whether the amendment goes far enough to create the 80,000 new units over 15 years promised by Planning staff (and whether it would have passed absent a last-minute pledge of $1B from the governor), but even the staunchest critic cannot deny that the City is finally making meaningful policy changes in pursuit of its stated, and repeated, goal of making New York housing more affordable.  

Property Tax Relief: 99 or bust  

The importance of property tax policy on the housing market in New York cannot be overstated.  Some form of abatement—with the goal of spurring housing development—has existed since the 1970s.  The story of property tax relief is one of increasing limitations on eligibility:  every new amendment requires more givebacks to receive the benefit.  In the past decade, the amount and depth of affordable housing required has increased considerably, and the latest trend, which began in 2016 and was expanded last year, is the inclusion of mandatory minimum wage requirements (read: union labor) for certain large projects.  Right now, the magic number seems to be 99.  Under the 2024 program (“485-x” for those in the know), new projects with 100 or more dwelling units must provide affordable housing for 25 percent of dwelling units and pay a prevailing wage of at least $40/hour, while projects with 99 dwelling units need only provide affordable housing for 20 percent and have no prevailing wage requirement.    

What to Watch For

We see two big questions for 2025:  (1) Will 2024’s legislative successes translate to an uptick in construction; and (2) What’s in store legislatively for 2025?  With respect to the former, we should know by Q2 whether the private sector is ready to buy, sell, borrow, and build like it’s 2019.  Early signs will be the number of new building permits filed and the pace of the lending market (and, in particular, will big, institutional lenders be ready to get back in the construction loan market or will real estate private equity firms continue to lead the way?).  With respect to the latter, 2025 is an election year for New York’s embattled Mayor Adams (with the primary—the only real contest—in June) and Governor Hochul’s last full year before the gubernatorial contest in 2026 to sell herself to New Yorkers, and, if rumors are to be believed, Democratic Party insiders eyeing the 2028 Presidential ticket.  Will Adams and Hochul work together on policy?  Or will they pick fights and point fingers?  How will the policy priorities of the Trump administration impact housing?  Only time will tell.  Regardless of the answers, we see tremendous opportunities for investment in New York City real estate in 2025.    

Our team is closely following these issues, and we look forward to providing an update on the latest developments in a panel discussion with industry experts and New York City officials in Spring 2025.

Authored by John Egnatios-Beene, Ross Moskowitz, and Karen Scanna.